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Now you can listen to our blog, “Getting Mortgage And Applying for Probate Canada” while on the go.
If you are wondering what a probate period is, how long it takes, how much a mortgage costs and can you get a mortgage on your inherited house, then this guide is for you.
Have you just inherited property, and set to own what’s been left for you in a will? If yes, you might be thinking about what you should do next. Know that an inherited house can bring a lot of emotions and questions about whether to keep, sell or rent it. So, in such a situation, it is wise to consult an expert.
However, read this guide till the end and you will be able to make an expert decision by yourself. This help is created to help you make sense of what your options are and where you should go from this.
First and foremost know that if you have inherited a property, it will go through probate before reaching you. For this, it is important you know what probate is and how it works.
What is Probate and How it Works?
When you apply for the legal right to ownership of someone’s property, money or any possessions when they die, this is called applying for probate. It is a legal process of attesting a will. If your name is in the will, it will need to go through the probate process.
During the process, you cannot do anything with the house or property until the probate is complete. If there is a mortgage attached to the property with a hefty balance, then you will need to contact the lender and explain the situation. They are usually sympathetic and provide a grace period with suspended repayments until the estate is settled.
That’s how the probate process works. If a person who died has left a will, it will likely include a name of an executor. This could be you, your family member or a trusted friend. Whoever is named as the executor has a lot of work to do before he becomes the owner.
First, check if you are liable to pay the inheritance tax. If there is not a will and the person who died do not have a living spouse, you will have to apply for a grant of representation. This is referred to as probate and if you are granted probate, you will get access to their bank account. Then, you can arrange for the assets to be sold. The dead person’s funds and collective estate will also be used to settle any debts and pay associated taxes.
Applying for Probate
Once you know what probate is and how it works, you can begin the probate process. To apply for probate of an estate, apply to the Ontario Superior Court of Justice. You can apply for a Small Estate Certificate if the total value is $150,000, but if the estate’s value is more than $150,000, apply for a Certificate of Appointment of Estate Trustee. You can learn more about both these options here.
Before applying for probate, know whether the person or financial institution holding the estate assets requires you to get a Certificate of Appointment of Estate Trustee or a Small Estate Certificate.
You can only apply for probate when:
- the deceased person died without a will
- there is no name on the deceased’s will
- a financial institution wants proof before giving you the money
- the estate’s assets include real property which can’t be transferred to another person by right of survivorship
- deceased’s real property needs to be sold
- there is a dispute about who is the estate trustee
- there is a dispute about the validity of the will
- some beneficiaries named in the will can’t provide legal consent
Before starting a probate application, determine whether anyone else has already started the court application or issued a certificate. You will avoid the hassle of a rejected application if you already know if the application was started or a certificate was issued.
To apply for the probate, you will need to submit the following documents:
- the deceased’s original Will
- any addition to the Will that is important
- proof of death
- court forms (information about the deceased’s assets and beneficiaries)
Provide the person’s death proof by a death certificate or a court order. You can get the death certificate from a funeral director.
Can I Get a Mortgage While Applying for Probate on a Property?
The short answer is Yes! You can get a mortgage while waiting for probate. However, this will depend on your ability to meet the lender’s mortgage requirements. In simple words, you will need to prove that you have the good financial strength and you can afford the mortgage. This mortgage can be with the same lender, with which you are working already, and can be with a new one as well.
If you need help with your mortgage, Lionsgate Financial can provide you with the best helping hand. We have already helped hundreds of Canadians get mortgages for their properties and can help you as well. Reach out to us to have a chat about it.
How does a Lender Assess Affordability for Mortgage When Applying for Probate?
When you apply for a mortgage, the lender determines affordability with the size of the loan you are applying for. This also includes your ability to prove your affordability and your financial strength. On top of everything, your payment history of a past mortgage plays a vital role in determining the outcome of your application.
The lender or mortgage broker will look at the following to make his decision.
- your assets
- your income
- & level of debt
Some lenders may also ask for the stress test to check your affordability. This involves requirements for you to be able to afford a hypothetical interest rate increase. This can occur is the case if the Canadian banks or brokers raise the interest rate.
Can a First-time Buyer Get Mortgage for Inherited House?
If you are a first-time buyer, which means you are someone who never owned a property before, then lenders will see strong evidence that you can afford to repay the mortgage. However, know that you won’t get any special benefit as you won’t be classed as a first-time buyer. The reason is that once your name is on the Will, you already become the property owner. So, even if you never owned a property before, your name on Will makes you the owner.
So, even if you are a first-time buyer, you will have to go through the same process as others are going for the mortgage on an inherited house.
What if You are Inheriting a House with a Mortgage?
If the estate has enough investments to cover the mortgage, you will inherit the house mortgage-free. However, if the estate does not have enough assets to pay off the mortgage, then the house itself may need to be sold. This is because every mortgage lender will allow the inheritor to take over the mortgage payments. And a house can’t be settled until the mortgage is paid off.
So, if you have the financial strength to buy the house from the estate, you can. Otherwise, the house will be sold in the open market to cover the costs.
The Bottom Line
At Lionsgate, we specialize in helping people get the extra cash they need, obtain funding for private mortgages, as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, fill out the form below. Or, You can leave us a message and we will try to connect you with local lenders and sources that best meet your needs.
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